Yu v. NLRC GR No.

97212, June 30, 1993

Facts:

Benjamin Yu used to be the Assistant General Manager of Jade Mountain, a partnership engaged in
marble quarrying and export business. The majority of the founding partners sold their interests in said
partnership to Willy Co and Emmanuel Zapanta without Yus knowledge. Said new partnership continued
operating under the same name and continued the businesss operations. However, it transferred its main
office from Makati to Mandaluyong. Said new partnership did not anymore availed of the services of Yu.
Thus, he filed a complaint for illegal dismissal, recovery of unpaid wages and damages.

Ruling :

The legal effect of the changes in the membership of the partnership was the dissolution of the old
partnership which had hired Yu in 1984 and the emergence of a new firm composed of Willy Co and
Emmanuel Zapanta in 1987. The new partnership simply took over the business enterprise owned by the
preceeding partnership, and continued using the old name of Jade Mountain Products Company Limited,
without winding up the business affairs of the old partnership, paying off its debts, liquidating and
distributing its net assets, and then re-assembling the said assets or most of them and opening a new
business enterprise. Not only the retiring partners but also the new partnership itself which continued the
business of the old, dissolved, one, are liable for the debts of the preceding partnership

BENJAMIN YU, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and JADE
MOUNTAIN PRODUCTS COMPANY LIMITED, WILLY CO, RHODORA D. BENDAL, LEA BENDAL,
CHIU SHIAN JENG and CHEN HO-FU, respondents. G.R. No. 97212 | June 30, 1993 | Feliciano,
J. FACTS: Petitioner Benjamin Yu was formerly the Asst. General Manager of the marble quarrying
and export business "Jade Mountain Products Company Limited". The partnership was originally
organized by Respondents (all Taiwanese citizens According to petitioner Yu, he only actually
received half of his stipulated monthly salary (P4K), and will be paid when the firm shall have
secured additional operating funds from abroad. He actually managed the operations and finances
of the business; he had overall supervision of the. Sometime in 1988, without the knowledge of Yu,
the general partners Lea and Rhodora Bendal sold and transferred their interests in the partnership
to private respondent Willy Co and to one Emmanuel Zapanta. Mr. Yu Chang, a limited partner, also
sold and transferred his interest in the partnership to Willy Co. The partnership, now constituted
solely by Willy Co and Emmanuel Zapanta, continued to use the old firm name of Jade Mountain,
though they moved the firm's main office from Makati to Mandaluyong. Having learned of the transfer
of the firm's main office from Makati to Mandaluyong, petitioner Benjamin Yu reported to the
Mandaluyong office for work and met private respondent Willy Co for the first time. Petitioner was not
allowed to work anymore in the Jade Mountain business enterprise. His unpaid salaries remained
unpaid. Benjamin Yu filed a complaint for illegal dismissal and recovery of unpaid salaries against
Jade Mountain, Mr. Willy Co and the other private respondents. The partnership and Willy Co denied
petitioner's charges, contending in the main that Benjamin Yu was never hired as an employee by
the present or new partnership. LA held that petitioner had been illegally dismissed and ordered his
reinstatment. NLRC reversed saying that the new partnership had not retained petitioner Yu and that
there was no law requiring the new partnership to absorb the employees of the old partnership.
NLRC held that Benjamin Yu's claim for unpaid wages should be asserted against the original
members of the preceding partnership. Petitioner: A partnership has a juridical personality separate
and distinct from that of each of its members. Such independent legal personality subsists
notwithstanding changes in the identities of the partners. ISSUES: (1) whether the old partnership
had been extinguished - Yes (2) whether petitioner Yu can assert his rights against the new
partnership Yes, pursuant to Art 1840 RATIO: (1) Here, just about all of the partners had sold
their partnership interests (amounting to 82% of the total partnership interest) to Mr. Willy Co and
Emmanuel Zapanta. This, coupled with the retirement or withdrawal of the partners who had
originally owned such 82% interest, was enough to constitute a new partnership. [Arts 1828 and
1830] However, it does not automatically result in the termination of the legal personality of the old
partnership. Article 1829 provides that: on dissolution, the partnership is not terminated, but
continues until the winding up of partnership affairs is completed. It is important to underscore
the fact that the business of the old partnership was simply continued by the new
partners, without the old partnership undergoing the procedures relating to dissolution and
winding up of its business affairs. (2) Not only the retiring partners (Rhodora Bendal, et al.)
but also the new partnership itself which continued the business of the old, dissolved, one, are
liable for the debts of the preceding partnership. [see Art 1840 - where creditors of the dissolved
partnership are also creditors of the person or partnership continuing the business] Under Article
1840, creditors of the old Jade Mountain are also creditors of the new Jade Mountain which
continued the business of the old one without liquidation of the partnership affairs. It is clear that
Benjamin Yu is entitled to enforce his claim for unpaid salaries, as well as other claims relating to his
employment with the previous partnership and against the new Jade Mountain. It is at the same time
also evident to the Court that the new partnership was entitled to appoint and hire a new general or
assistant general manager to run the affairs of the business enterprise take over. The non-retention
of Benjamin Yu as Assistant General Manager did not therefore constitute unlawful termination. We
think that the precise authorized cause for termination in the case at bar was redundancy. The new
partnership had its own new General Manager, apparently Mr. Willy Co, the principal new owner
himself, who personally ran the business of Jade Mountain. Therefore, petitioner Benjamin Yu is
entitled only to separation pay. But because Mr. Yu was shabbily treated, moral damages
are proper, plus applicable interests. WHEREFORE, petition is GRANTED.

Idos v. CA G.R. NO. 110782, September 25, 1998, Quisumbing, J.

Facts:

In 1985, Eddie Alarilla and Irma Idos formed a partnership which they decided to terminate after a year. To
pay Alarillas share of the asset, Idos issued 4 post dated checks. Alarilla was able to encash the first,
second and fourth checks but the third was dishonored for insufficiency of funds. He demanded payment
but Idos failed to pay. She claimed that the checks were issued as assurance of Alarillas share in the
assets of the partnership and that it was supposed to be deposited until the stocks were sold. He filed an
information for violation of BP blg. 22 against Idos in which she was found guilty by the trial court.

Issue: Did the court confused and merged into one the legal concepts of dissolution, liquidation and
termination of a partnership?

Ruling: The partners agreement to terminate the partnership did not automatically dissolved the
partnership. They were in the process of winding-up when the check in question was issued. The best
evidenceof the existence of the partnership, which was not yet terminated were the unsold goods and
uncollected receivables which were presented to the trial court. Article 1829 of the Civil Code provides
that on dissolution the partnership is not terminated but continues until the winding-up of partnership
affairs is completed. Since the partnership has not been terminated, Idos and Alarilla remained co-
partners. The check was issued by petitioner to respondent as would a partner to another and not as a
payment by debtor to creditor. Thus, absent the first element of the complained offense, the act is not
punishable by the statute.

EMILIO EMNACE, petitioner, vs. COURT OF APPEALS, ESTATE OF

VICENTE TABANAO, SHERWIN TABANAO, VICENTE WILLIAM
TABANAO, JANETTE TABANAO DEPOSOY, VICENTA MAY
TABANAO VARELA, ROSELA TABANAO and VINCENT
TABANAO, respondents.

DECISION

YNARES-SANTIAGO, J.:

Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a
business concern known as Ma. Nelma Fishing Industry. Sometime in January of 1986, they
decided to dissolve their partnership and executed an agreement of partition and distribution of
the partnership properties among them, consequent to Jacinto Divinagracias withdrawal from the
partnership.[1] Among the assets to be distributed were five (5) fishing boats, six (6) vehicles, two
(2) parcels of land located at Sto. Nio and Talisay, Negros Occidental, and cash deposits in the
local branches of the Bank of the Philippine Islands and Prudential Bank.

Throughout the existence of the partnership, and even after Vicente Tabanaos untimely
demise in 1994, petitioner failed to submit to Tabanaos heirs any statement of assets and
liabilities of the partnership, and to render an accounting of the partnerships finances. Petitioner
also reneged on his promise to turn over to Tabanaos heirs the deceaseds 1/3 share in the total
assets of the partnership, amounting to P30,000,000.00, or the sum of P10,000,000.00, despite
formal demand for payment thereof.[2]

Consequently, Tabanaos heirs, respondents herein, filed against petitioner an action for
accounting, payment of shares, division of assets and damages.[3] In their complaint, respondents
prayed as follows:

1. Defendant be ordered to render the proper accounting of all the assets and liabilities
of the partnership at bar; and
2. After due notice and hearing defendant be ordered to
pay/remit/deliver/surrender/yield to the plaintiffs the following:

A. No less than One Third (1/3) of the assets, properties, dividends, cash, land(s),
fishing vessels, trucks, motor vehicles, and other forms and substance of treasures
which belong and/or should belong, had accrued and/or must accrue to the
partnership;

B. No less than Two Hundred Thousand Pesos (P200,000.00) as moral damages;

C. Attorneys fees equivalent to Thirty Percent (30%) of the entire share/amount/award

which the Honorable Court may resolve the plaintiffs as entitled to plus P1,000.00 for
every appearance in court.[4]

Petitioner filed a motion to dismiss the complaint on the grounds of improper venue, lack of
jurisdiction over the nature of the action or suit, and lack of capacity of the estate of Tabanao to
sue.[5] On August 30, 1994, the trial court denied the motion to dismiss. It held that venue was
properly laid because, while realties were involved, the action was directed against a particular
person on the basis of his personal liability; hence, the action is not only a personal action but
also an action in personam. As regards petitioners argument of lack of jurisdiction over the
action because the prescribed docket fee was not paid considering the huge amount involved in
the claim, the trial court noted that a request for accounting was made in order that the exact
value of the partnership may be ascertained and, thus, the correct docket fee may be
paid. Finally, the trial court held that the heirs of Tabanao had a right to sue in their own names,
in view of the provision of Article 777 of the Civil Code, which states that the rights to the
succession are transmitted from the moment of the death of the decedent.[6]

The following day, respondents filed an amended complaint,[7] incorporating the additional
prayer that petitioner be ordered to sell all (the partnerships) assets and thereafter
pay/remit/deliver/surrender/yield to the plaintiffs their corresponding share in the proceeds
thereof. In due time, petitioner filed a manifestation and motion to dismiss, [8] arguing that the trial
court did not acquire jurisdiction over the case due to the plaintiffs failure to pay the proper
docket fees. Further, in a supplement to his motion to dismiss,[9] petitioner also raised prescription
as an additional ground warranting the outright dismissal of the complaint.

On June 15, 1995, the trial court issued an Order, [10] denying the motion to dismiss inasmuch
as the grounds raised therein were basically the same as the earlier motion to dismiss which has
been denied. Anent the issue of prescription, the trial court ruled that prescription begins to run
only upon the dissolution of the partnership when the final accounting is done. Hence,
prescription has not set in the absence of a final accounting.Moreover, an action based on a
written contract prescribes in ten years from the time the right of action accrues.

Petitioner filed a petition for certiorari before the Court of Appeals,[11] raising the following
issues:

I. Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion
in taking cognizance of a case despite the failure to pay the required docket fee;

II. Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion
in insisting to try the case which involve (sic) a parcel of land situated outside of its
territorial jurisdiction;

III. Whether or not respondent Judge acted without jurisdiction or with grave abuse of
discretion in allowing the estate of the deceased to appear as party plaintiff, when there is no
intestate case and filed by one who was never appointed by the court as administratrix of the
estates; and

IV. Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion
in not dismissing the case on the ground of prescription.

On August 8, 1996, the Court of Appeals rendered the assailed decision, [12] dismissing the
petition for certiorari, upon a finding that no grave abuse of discretion amounting to lack or
excess of jurisdiction was committed by the trial court in issuing the questioned orders denying
petitioners motions to dismiss.

Not satisfied, petitioner filed the instant petition for review, raising the same issues resolved
by the Court of Appeals, namely:

I. Failure to pay the proper docket fee;

II. Parcel of land subject of the case pending before the trial court is outside the said courts
territorial jurisdiction;

III. Lack of capacity to sue on the part of plaintiff heirs of Vicente Tabanao; and

IV. Prescription of the plaintiff heirs cause of action.

It can be readily seen that respondents primary and ultimate objective in instituting the
action below was to recover the decedents 1/3 share in the partnerships assets. While they ask for
an accounting of the partnerships assets and finances, what they are actually asking is for the trial
court to compel petitioner to pay and turn over their share, or the equivalent value thereof, from
the proceeds of the sale of the partnership assets. They also assert that until and unless a proper
accounting is done, the exact value of the partnerships assets, as well as their corresponding
share therein, cannot be ascertained. Consequently, they feel justified in not having paid the
commensurate docket fee as required by the Rules of Court.

We do not agree. The trial court does not have to employ guesswork in ascertaining the
estimated value of the partnerships assets, for respondents themselves voluntarily pegged the
worth thereof at Thirty Million Pesos (P30,000,000.00). Hence, this case is one which is really
not beyond pecuniary estimation, but rather partakes of the nature of a simple collection case
where the value of the subject assets or amount demanded is pecuniarily determinable. [13] While it
is true that the exact value of the partnerships total assets cannot be shown with certainty at the
time of filing, respondents can and must ascertain, through informed and practical estimation, the
amount they expect to collect from the partnership, particularly from petitioner, in order to
determine the proper amount of docket and other fees. [14] It is thus imperative for respondents to
pay the corresponding docket fees in order that the trial court may acquire jurisdiction over the
action.[15]

Nevertheless, unlike in the case of Manchester Development Corp. v. Court of Appeals,

where there was clearly an effort to defraud the government in avoiding to pay the correct
[16]

docket fees, we see no attempt to cheat the courts on the part of respondents. In fact, the lower
courts have noted their expressed desire to remit to the court any payable balance or lien on
whatever award which the Honorable Court may grant them in this case should there be any
deficiency in the payment of the docket fees to be computed by the Clerk of Court. [17] There is
evident willingness to pay, and the fact that the docket fee paid so far is inadequate is not an
indication that they are trying to avoid paying the required amount, but may simply be due to an
inability to pay at the time of filing. This consideration may have moved the trial court and the
Court of Appeals to declare that the unpaid docket fees shall be considered a lien on the
judgment award.

Petitioner, however, argues that the trial court and the Court of Appeals erred in condoning
the non-payment of the proper legal fees and in allowing the same to become a lien on the
monetary or property judgment that may be rendered in favor of respondents. There is merit in
petitioners assertion. The third paragraph of Section 16, Rule 141 of the Rules of Court states
that:

The legal fees shall be a lien on the monetary or property judgment in favor of the
pauper-litigant.

Respondents cannot invoke the above provision in their favor because it specifically applies
to pauper-litigants. Nowhere in the records does it appear that respondents are litigating as
paupers, and as such are exempted from the payment of court fees.[18]
 The rule applicable to the case at bar is Section 5(a) of Rule 141 of the Rules of Court,
which defines the two kinds of claims as: (1) those which are immediately ascertainable; and (2)
those which cannot be immediately ascertained as to the exact amount. This second class of
claims, where the exact amount still has to be finally determined by the courts based on evidence
presented, falls squarely under the third paragraph of said Section 5(a), which provides:

In case the value of the property or estate or the sum claimed is less or more in
accordance with the appraisal of the court, the difference of fee shall be refunded or
paid as the case may be. (Underscoring ours)

In Pilipinas Shell Petroleum Corporation v. Court of Appeals, [19] this Court pronounced that
the above-quoted provision clearly contemplates an initial payment of the filing fees
corresponding to the estimated amount of the claim subject to adjustment as to what later may be
proved.[20]Moreover, we reiterated therein the principle that the payment of filing fees cannot be
made contingent or dependent on the result of the case. Thus, an initial payment of the docket
fees based on an estimated amount must be paid simultaneous with the filing of the
complaint. Otherwise, the court would stand to lose the filing fees should the judgment later turn
out to be adverse to any claim of the respondent heirs.

The matter of payment of docket fees is not a mere triviality. These fees are necessary to
defray court expenses in the handling of cases.Consequently, in order to avoid tremendous losses
to the judiciary, and to the government as well, the payment of docket fees cannot be made
dependent on the outcome of the case, except when the claimant is a pauper-litigant.

Applied to the instant case, respondents have a specific claim 1/3 of the value of all the
partnership assets but they did not allege a specific amount. They did, however, estimate the
partnerships total assets to be worth Thirty Million Pesos (P30,000,000.00), in a
letter[21] addressed to petitioner. Respondents cannot now say that they are unable to make an
estimate, for the said letter and the admissions therein form part of the records of this case. They
cannot avoid paying the initial docket fees by conveniently omitting the said amount in their
amended complaint. This estimate can be made the basis for the initial docket fees that
respondents should pay. Even if it were later established that the amount proved was less or more
than the amount alleged or estimated, Rule 141, Section 5(a) of the Rules of Court specifically
provides that the court may refund the excess or exact additional fees should the initial payment
be insufficient. It is clear that it is only the difference between the amount finally awarded and
the fees paid upon filing of this complaint that is subject to adjustment and which may be
subjected to a lien.

In the oft-quoted case of Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion,[22] this
Court held that when the specific claim has been left for the determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment and it shall be the
responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess
and collect the additional fee. Clearly, the rules and jurisprudence contemplate the initial
payment of filing and docket fees based on the estimated claims of the plaintiff, and it is only
when there is a deficiency that a lien may be constituted on the judgment award until such
additional fee is collected.

Based on the foregoing, the trial court erred in not dismissing the complaint outright despite
their failure to pay the proper docket fees.Nevertheless, as in other procedural rules, it may be
liberally construed in certain cases if only to secure a just and speedy disposition of an
action.While the rule is that the payment of the docket fee in the proper amount should be
adhered to, there are certain exceptions which must be strictly construed.[23]

In recent rulings, this Court has relaxed the strict adherence to the Manchester doctrine,
allowing the plaintiff to pay the proper docket fees within a reasonable time before the expiration
of the applicable prescriptive or reglementary period.[24]

In the recent case of National Steel Corp. v. Court of Appeals,[25] this Court held that:

The court acquires jurisdiction over the action if the filing of the initiatory pleading is
accompanied by the payment of the requisite fees, or, if the fees are not paid at the
time of the filing of the pleading, as of the time of full payment of the fees within such
reasonable time as the court may grant, unless, of course, prescription has set in the
meantime.

It does not follow, however, that the trial court should have dismissed the complaint
for failure of private respondent to pay the correct amount of docket fees. Although
the payment of the proper docket fees is a jurisdictional requirement, the trial court
may allow the plaintiff in an action to pay the same within a reasonable time before
the expiration of the applicable prescriptive or reglementary period. If the plaintiff
fails to comply within this requirement, the defendant should timely raise the issue of
jurisdiction or else he would be considered in estoppel. In the latter case, the balance
between the appropriate docket fees and the amount actually paid by the plaintiff will
be considered a lien or any award he may obtain in his favor.(Underscoring ours)

Accordingly, the trial court in the case at bar should determine the proper docket fee based
on the estimated amount that respondents seek to collect from petitioner, and direct them to pay
the same within a reasonable time, provided the applicable prescriptive or reglementary period
has not yet expired. Failure to comply therewith, and upon motion by petitioner, the immediate
dismissal of the complaint shall issue on jurisdictional grounds.
 On the matter of improper venue, we find no error on the part of the trial court and the Court
of Appeals in holding that the case below is a personal action which, under the Rules, may be
commenced and tried where the defendant resides or may be found, or where the plaintiffs
reside, at the election of the latter.[26]

Petitioner, however, insists that venue was improperly laid since the action is a real action
involving a parcel of land that is located outside the territorial jurisdiction of the court a
quo. This contention is not well-taken. The records indubitably show that respondents are asking
that the assets of the partnership be accounted for, sold and distributed according to the
agreement of the partners. The fact that two of the assets of the partnership are parcels of land
does not materially change the nature of the action. It is an action in personam because it is an
action against a person, namely, petitioner, on the basis of his personal liability. It is not an
action in rem where the action is against the thing itself instead of against the person.
[27]
Furthermore, there is no showing that the parcels of land involved in this case are being
disputed. In fact, it is only incidental that part of the assets of the partnership under liquidation
happen to be parcels of land.

The time-tested case of Claridades v. Mercader, et al.,[28] settled this issue thus:

The fact that plaintiff prays for the sale of the assets of the partnership, including the
fishpond in question, did not change the nature or character of the action, such sale
being merely a necessary incident of the liquidation of the partnership, which should
precede and/or is part of its process of dissolution.

The action filed by respondents not only seeks redress against petitioner. It also seeks the
enforcement of, and petitioners compliance with, the contract that the partners executed to
formalize the partnerships dissolution, as well as to implement the liquidation and partition of the
partnerships assets. Clearly, it is a personal action that, in effect, claims a debt from petitioner
and seeks the performance of a personal duty on his part.[29] In fine, respondents complaint
seeking the liquidation and partition of the assets of the partnership with damages is a personal
action which may be filed in the proper court where any of the parties reside. [30] Besides, venue
has nothing to do with jurisdiction for venue touches more upon the substance or merits of the
case.[31] As it is, venue in this case was properly laid and the trial court correctly ruled so.

On the third issue, petitioner asserts that the surviving spouse of Vicente Tabanao has no
legal capacity to sue since she was never appointed as administratrix or executrix of his
estate. Petitioners objection in this regard is misplaced. The surviving spouse does not need to be
appointed as executrix or administratrix of the estate before she can file the action. She and her
children are complainants in their own right as successors of Vicente Tabanao. From the very
moment of Vicente Tabanaos death, his rights insofar as the partnership was concerned were
transmitted to his heirs, for rights to the succession are transmitted from the moment of death of
the decedent.[32]

Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were
transmitted to respondents by operation of law, more particularly by succession, which is a mode
of acquisition by virtue of which the property, rights and obligations to the extent of the value of
the inheritance of a person are transmitted.[33] Moreover, respondents became owners of their
respective hereditary shares from the moment Vicente Tabanao died.[34]

A prior settlement of the estate, or even the appointment of Salvacion Tabanao as executrix
or administratrix, is not necessary for any of the heirs to acquire legal capacity to sue. As
successors who stepped into the shoes of their decedent upon his death, they can commence any
action originally pertaining to the decedent. [35] From the moment of his death, his rights as a
partner and to demand fulfillment of petitioners obligations as outlined in their dissolution
agreement were transmitted to respondents. They, therefore, had the capacity to sue and seek the
courts intervention to compel petitioner to fulfill his obligations.

Finally, petitioner contends that the trial court should have dismissed the complaint on the
ground of prescription, arguing that respondents action prescribed four (4) years after it accrued
in 1986. The trial court and the Court of Appeals gave scant consideration to petitioners hollow
arguments, and rightly so.

The three (3) final stages of a partnership are: (1) dissolution; (2) winding-up; and (3)
termination.[36] The partnership, although dissolved, continues to exist and its legal personality is
retained, at which time it completes the winding up of its affairs, including the partitioning and
distribution of the net partnership assets to the partners.[37] For as long as the partnership exists,
any of the partners may demand an accounting of the partnerships business. Prescription of the
said right starts to run only upon the dissolution of the partnership when the final accounting is
done.[38]

Contrary to petitioners protestations that respondents right to inquire into the business affairs
of the partnership accrued in 1986, prescribing four (4) years thereafter, prescription had not
even begun to run in the absence of a final accounting. Article 1842 of the Civil Code provides:

The right to an account of his interest shall accrue to any partner, or his legal
representative as against the winding up partners or the surviving partners or the
person or partnership continuing the business, at the date of dissolution, in the absence
of any agreement to the contrary.

Applied in relation to Articles 1807 and 1809, which also deal with the duty to account, the
above-cited provision states that the right to demand an accounting accrues at the date of
dissolution in the absence of any agreement to the contrary. When a final accounting is made, it
is only then that prescription begins to run. In the case at bar, no final accounting has been made,
and that is precisely what respondents are seeking in their action before the trial court, since
petitioner has failed or refused to render an accounting of the partnerships business and
assets. Hence, the said action is not barred by prescription.

In fine, the trial court neither erred nor abused its discretion when it denied petitioners
motions to dismiss. Likewise, the Court of Appeals did not commit reversible error in upholding
the trial courts orders. Precious time has been lost just to settle this preliminary issue, with
petitioner resurrecting the very same arguments from the trial court all the way up to the
Supreme Court. The litigation of the merits and substantial issues of this controversy is now long
overdue and must proceed without further delay.

WHEREFORE, in view of all the foregoing, the instant petition is DENIED for lack of
merit, and the case is REMANDED to the Regional Trial Court of Cadiz City, Branch 60, which
is ORDERED to determine the proper docket fee based on the estimated amount that plaintiffs
therein seek to collect, and direct said plaintiffs to pay the same within a reasonable time,
provided the applicable prescriptive or reglementary period has not yet expired. Thereafter, the
trial court is ORDERED to conduct the appropriate proceedings in Civil Case No. 416-C.

Costs against petitioner.

SO ORDERED.

JESUS SY, JAIME SY, ESTATE OF JOSE SY, ESTATE OF VICENTE SY,
HEIR OF MARCIANO SY represented by JUSTINA VDA. DE SY and
WILLIE SY, petitioners, vs. THE COURT OF APPEALS, INTESTATE
ESTATE OF SY YONG HU, SEC. HEARING OFFICER FELIPE
TONGCO, SECURITIES AND EXCHANGE COMMISSION,
respondents.

[G.R. No. 100313. August 31, 1999]

SY YONG HU & SONS, JOHN TAN, BACOLOD CANVAS AND

UPHOLSTERY SUPPLY CO., AND NEGROS ISUZU
SALES, petitioners, vs. HONORABLE COURT OF APPEALS (11th
Division), INTESTATE ESTATE OF THE LATE SY YONG HU, JOSE
 FALSIS, JR., AND HON. BETHEL KATALBAS-MOSCARDON, RTC
OF NEGROS OCCIDENTAL, Branch 51, respondents.

DECISION

PURISIMA, J.:

At bar are two consolidated petitions for review on certiorari under Rule 45 of the Revised
Rules of Court, docketed as G. R. Nos. 94285 and G.R. No. 100313, respectively, seeking to
reinstate the Resolution of the Court of Appeals in CA - G. R. SP No. 17070 and its Decision in
CA-G. R. SP No. 24189.

In G. R. No. 94285, the petitioners assail the Resolution [1] dated June 27, 1990 of the Court
of Appeals granting the Motion for Reconsideration interposed by the petitioners (now the
private respondents) of its Decision[2], promulgated on January 15, 1990, which affirmed the
Order[3] issued on January 16, 1989 by the Securities and Exchange Commission (SEC) en
banc and the Order[4] of SEC Hearing Officer Felipe Tongco, dated October 5, 1988,

The facts that matter are as follows:

Sy Yong Hu & Sons is a partnership of Sy Yong Hu and his sons, Jose Sy, Jayme Sy,
Marciano Sy, Willie Sy, Vicente Sy, and Jesus Sy, registered with the SEC on March 29, 1962,
with Jose Sy as managing partner. The partners and their respective shares are reflected in the
Amended Articles of Partnership[5] as follows:

NAMES AMOUNT CONTRIBUTED

SY YONG HU P 31, 000. 00

JOSE S. SY 205, 000. 00

JAYME S. SY 112, 000. 00

MARCIANO S. SY 143, 000. 00

WILLIE S. SY 85, 000. 00

VICENTE SY 85, 000. 00

JESUS SY 88, 000. 00

Partners Sy Yong Hu, Jose Sy, Vicente Sy, and Marciano Sy died on May 18, 1978, August 12,
1978, December 30, 1979 and August 7, 1987, respectively.[6] At present, the partnership has
valuable assets such as tracts of lands planted to sugar cane and commercial lots in the business
district of Bacolod City.

Sometime in September, 1977, during the lifetime of all the partners, Keng Sian brought an
action,[7] docketed as Civil Case No. 13388 before the then Court of First Instance of Negros
Occidental, against the partnership as well as against the individual partners for accounting of all
the properties allegedly owned in common by Sy Yong Hu and the plaintiff (Keng Sian), and for
the delivery or reconveyance of her one-half (1/2) share in said properties and in the fruits
thereof. Keng Sian averred that she was the common law wife of partner Sy Yong Hu, that Sy
Yong Hu, together with his children,[8] who were partners in the partnership, connived to deprive
her of her share in the properties acquired during her cohabitation with Sy Yong Hu, by diverting
such properties to the partnership.[9]

In their answer dated November 3, 1977, the defendants, including Sy Yong Hu himself,
countered that Keng Sian is only a house helper of Sy Yong Hu and his wife, subject properties
are exclusively owned by defendant partnership, and plaintiff has absolutely no right to or
interest therein.[10]

On September 20, 1978, during the pendency of said civil case, Marciano Sy filed a petition
for declaratory relief against partners Vicente Sy, Jesus Sy and Jayme Sy, docketed as SEC Case
No. 1648, praying that he be appointed managing partner of the partnership, to replace Jose Sy
who died on August 12, 1978. Answering the petition, Vicente Sy, Jesus Sy and Jaime Sy, who
claim to represent the majority interest in the partnership, sought the dissolution of the
partnership and the appointment of Vicente Sy as managing partner. In due time, Hearing Officer
Emmanuel Sison came out with a decision [11](Sison Decision) dismissing the petition, dissolving
the partnership and naming Jesus Sy, in lieu of Vicente Sy who had died earlier, as the managing
partner in charge of winding the affairs of the partnership.

The Sison decision was affirmed in toto by the SEC en banc in a decision[12] (Abello
decision) dated June 8, 1982, disposing thus:

WHEREFORE, the Commission en banc affirms the dispositive portion of the

decision of the Hearing Officer, but clarifies that: (1) the partnership was dissolved by
express will of the majority and not ipso facto because of the death of any partner in
view of the stipulation of Articles of Partnership and the provisions of the New Civil
Code particularly Art. 1837 [2] and Art. 1841. (2) The Managing Partner designated
by the majority, namely Jesus Sy, vice Vicente Sy (deceased) shall only act as a
manager in liquidation and he shall submit to the Hearing Officer an accounting and a
project of partition, within 90 days from receipt of this decision. (3) The petitioner is
also required within the same period to submit his counter-project of partition, from
date of receipt of the Managing Partners project of partition. (4) The case is remanded
to the Hearing Officer for evaluation and approval of the accounting and project of
partition.

On the basis of the above decision of the SEC en banc, Hearing Officer Sison approved a
partial partition of certain partnership assets in an order[13]dated December 2, 1986. Therefrom,
respondents seasonably appealed.

In 1982, the children of Keng Sian with Sy Yong Hu, namely, John Keng Seng, Carlos Keng
Seng, Tita Sy, Yolanda Sy and Lolita Sy, filed a petition, docketed as SEC Case No 2338, to
revoke the certificate of registration of Sy Yong Hu & Sons, and to have its assets reverted to the
estate of the late Sy Yong Hu. After hearings, the petition was dismissed by Hearing Officer
Bernardo T. Espejo in an Order, dated January 11, 1984, which Order became final since no
appeal was taken therefrom.[14]

After the dismissal of SEC Case No. 2338, the children of Keng Sian sought to intervene in
SEC Case No. 1648 but their motion to so intervene was denied in an Order dated May 9,
1985. There was no appeal from said order.[15]

In the meantime, Branch 43 of the Regional Trial Court of Negros Occidental appointed one
Felix Ferrer as a Special Administrator for the Intestate Estate of Sy Yong Hu in Civil Case No.
13388. Then, on August 30, 1985, Alex Ferrer moved to intervene in the proceedings in SEC
Case No. 1648, for the partition and distribution of the partnership assets, on behalf of the
respondent Intestate Estate.[16]

It appears that sometime in December, 1985, Special Administrator Ferrer filed an Amended
Complaint on behalf of respondent Intestate Estate in Civil Case No. 13388, wherein he joined
Keng Sian as plaintiff and thereby withdrew as defendant in the case. Special Administrator
Ferrer adopted the theory of Keng Sian that the assets of the partnership belong to Keng Sian and
Sy Yong Hu (now represented by the Estate of Sy Yong Hu) in co-ownership, which assets were
wrongfully diverted in favor of the defendants.[17]

The motion to intervene in SEC Case No. 1648, filed by Special Administrator Alex Ferrer
on behalf of the respondent Estate, was denied in the order issued on May 9, 1986 by Hearing
Officer Sison. With the denial of the motion for reconsideration, private respondent Intestate
Estate of Sy Yong Hu appealed to the Commission en banc.

In its decision (Sulit decision) on the aforesaid appeal from the Order dated May 9, 1986,
and the Order dated December 2, 1986, the SEC en banc[18]ruled:
WHEREFORE, in the interest of Justice and equity, substantive rights of due process
being paramount over the rules of procedure, and in order to avoid multiplicity of
suits; the order of the hearing officer below dated May 9, 1986 denying the motion to
intervene in SEC Case No. 1648 of appellant herein as well as the order dated
December 2, 1986[19] denying the motion for reconsideration are hereby reversed and
the motion to intervene given due course. The instant case is hereby remanded to the
hearing officer below for further proceeding on the aspect of partition and/or
distribution of partnership assets. The urgent motion for the issuance of a restraining
order is likewise hereby remanded to the hearing officer below for appropriate action.
[20]

The said decision of the SEC en banc reiterated that the Abello decision of June 8, 1982, which
upheld the order of dissolution of the partnership, had long become final and executory. No
further appeal was taken from the Sulit Decision.

During the continuation of the proceedings in SEC Case No. 1648, now presided over by
Hearing Officer Felipe S. Tongco who had substituted Hearing Officer Sison, the propriety of
placing the Partnership under receivership was taken up. The parties brought to the attention of
the Hearing Officer the fact of existence of Civil Case No. 903 (formerly Civil Case No. 13388)
pending before the Regional Trial Court of Negros Occidental. They also agreed that during the
pendency of the aforesaid court case, there will be no disposition of the partnership assets. [21] On
October 5, 1988, Hearing Officer Tongco came out with an Order[22] (Tongco Order)
incorporating the above submissions of the parties and placing[23] the partnership under a
receivership committee, explaining that it is the most equitable fair and just manner to preserve
the assets of the partnership during the pendency of the civil case in the Regional Trial Court of
Bacolod City.

On October 22, 1988, a joint Notice of Appeal to the SEC en banc was filed by herein
petitioners Jayme Sy, Jesus Sy, Estate of Jose Sy, Estate of Vicente Sy, Heirs of Marciano Sy
(represented by Justina Vda. de Sy), and Willie Sy, against the Intervenor (now private
respondent). In an order (Lopez Order) dated January 16, 1989, the SEC en banc[24]affirmed the
Tongco Order.

With the denial of their Motion for Reconsideration,[25] petitioners filed a special civil action
for certiorari with the Court of Appeals.

On January 15, 1990, the Court of Appeals granted the petition and set aside the Tongco and
Lopez Orders, and remanded the case for further execution of the 1982 Abello and 1988 Sulit
Decisions, ordering the partition and distribution of the partnership properties.[26]
 Private respondent seasonably interposed a motion for reconsideration of such decision of
the Court of Appeals.

Acting thereupon on June 27, 1990, the Court of Appeals issued its assailed Resolution,
reversing its Decision of January 15, 1990, and remanding the case to the SEC for the formation
of a receivership committee, as envisioned in the Tongco Order.

G. R. No. 100313 came about in view of the dismissal by the Court of Appeals [27] of the
Petition for Certiorari with a Prayer for Preliminary Injunction, docketed as CA-G. R. SP No.
24189, seeking to annul and set aside the orders, dated January 24, 1991 and April 19, 1989,
respectively, in Civil Case No. 5326 before the Regional Trial Court of Bacolod City.

The antecedent facts are as follows:

Sometime in June of 1988, petitioner Sy Yong Hu & Sons through its Managing Partner,
Jesus Sy, applied for a building permit to reconstruct its building called Sy Yong Hu & Sons
Building, located in the central business district of Bacolod City, which had been destroyed by
fire in the late 70s. On July 5, 1988, respondent City Engineer issued Building Permit No. 4936
for the reconstruction of the first two floors of the building. Soon thereafter, reconstruction work
began. In January, 1989, upon completion of its reconstruction, the building was occupied by the
herein petitioners, Bacolod and Upholstery Supply Company and Negros Isuzu Sales, which
businesses are owned by successors-in-interest of the deceased partners Jose Sy and Vicente
Sy. Petitioner John Tan, who is also an occupant of the reconstructed building, is the brother-in-
law of deceased partner Marciano Sy.[28]

From the records on hand, it can be gleaned that the Tongco Order [29], dated October 5, 1988,
in SEC Case No. 1648, had, among others, denied a similar petition of the intervenors therein
(now private respondents) for a restraining order and/or injunction to enjoin the reconstruction of
the same building. However, on October 10, 1988, respondent Intestate Estate sent a letter to the
City Engineer claiming that Jesus Sy is not authorized to act for petitioners Sy Yong Hu & Sons
with respect to the reconstruction or renovation of the property of the partnership. This was
followed by a letter dated November 11, 1988, requesting the revocation of Building Permit No.
4936.

Respondent City Engineer inquired[30] later from Jesus Sy for an authority to sign for and on
behalf of Sy Yong Hu & Sons to justify the latters signature in the application for the building
permit, informing him that absent any proof of his authority, he would not be issued an
occupancy permit.[31]On December 27, 1988, respondent Intestate Estate reiterated its objection to
the authority of Jesus Sy to apply for a building permit and pointing out that in view of the
creation of a receivership committee, Jesus Sy no longer had any authority to act for the
partnership.[32]
 In reply, Jesus Sy informed the City Engineer that the Tongco Order had been elevated to the
SEC en banc, making him still the authorized manager of the partnership. He then requested that
an occupancy permit be issued as Sy Yong Hu & Sons had complied with the requirements of the
City Engineers Office and the National Building Code.[33]

Unable to convince the respondent City Engineer to revoke subject building permit,
respondent Intestate Estate brought a Petition for Mandamus with prayer for a Writ of
Preliminary Injunction, docketed as Civil Case No 5326 before the Regional Trial Court of
Bacolod City and entitled Intestate Estate of the Late Sy Yong Hu vs. Engineer Jose P. Falsis, Jr.
[34]
The Complaint concluded with the following prayer:

WHEREFORE PREMISES CONSIDERED, it is respectfully prayed of the Honorable

Court that:

1. A writ of Preliminary Injunction be issued to the respondent, after preliminary

hearing is had. compelling his office to padlock the premises occupied, without the
requisite Certificate of Occupancy; to stop all construction activities, and barricade the
same premises so that the unwary public will not be subject to undue hazards due to
lack of requisite safety precaution;

2. The Respondent be ordered to enforce without exemption every requisite provision

of the Building Code as so mandated by it.[35]

Petitioners Sy Yong Hu & Sons, the owners of the building sought to be padlocked were not
impleaded as party to the petition dated February 22, 1989. Neither were the lessees-occupants
thereon so impleaded. Thus, they were not notified of the hearing scheduled for April 5, 1989, on
which date the Petition was heard. Subsequently, however, the Regional Trial Court issued an
order dated April 19, 1989 for the issuance of a Writ of Preliminary Mandatory Injunction
ordering the City Engineer to padlock the building.[36]

On May 9, 1989, upon learning of the issuance of the Writ of Preliminary Injunction, dated
May 4, 1989, petitioners immediately filed the: (1) Motion for Intervention; (2) Answer in
Intervention; and (3) Motion to set aside order of mandatory injunction. In its order dated June
22, 1989, the Motion for Intervention was granted by the lower court through Acting Presiding
Judge Porfirio A. Parian.

On August 3, 1989, respondent Intestate Estate presented a Motion to cite Engineer Jose
Falsis, Jr. in contempt of court for failure to implement the injunctive relief.
 On August 15, 1989, petitioners submitted an Amended Answer in Intervention. Reacting
thereto, respondent Intestate Estate filed a Motion to Strike or Expunge from the Record the
Amended Answer in Intervention.[37]

On January 25, 1990, petitioner Sy Yong Hu & Sons again wrote the respondent City
Engineer to reiterate its request for the immediate issuance of a certificate of occupancy, alleging
that the Court of Appeals in its Decision of January 15, 1990 in CA-G. R. No. 17070 had
reversed the SEC decision which approved the appointment of a receivership
committee. However, the City Engineer refused to issue the Occupancy Permit without the
conformity of the respondent Intestate Estate and one John Keng Seng who claims to be an
Illegitimate son of the Late Sy Yong Hu.[38]

In an order issued on January 24, 1991 upon an Ex Parte Motion to Have All Pending
Incidents Resolved filed by respondent Intestate Estate, Judge Bethel Katalbas-Moscardon issued
an order modifying the Writ of Preliminary Mandatory Injunction, and directing the respondent
City Engineer to:

x x x immediately order stoppage of any work affecting the construction of the said
building under Lot 259-A-2 located at Gonzaga Street adjacent to the present Banco
de Oro Building, BACOLOD City, to cancel or cause to be cancelled the Building
Permit it had issued; to order the discontinuance of the occupancy or use of said
building or structure or portion thereof found to be occupied or used, the same being
contrary and violative of the provisions of the Code; and to desist from issuing any
certificate of Occupancy until the merits of this case can finally be resolved by this
Court. x x x

Again, it is emphasized that the issue involved is solely question of law and the Court
cannot see any logical reason that the intervenors should be allowed to intervene as
earlier granted in the Order of the then Presiding Judge Porfirio A. Parian, of June 22,
1989. Much less for said intervenors to move for presentation of additional parties,
only on the argument of Intervenors that any restraining order to be issued by this
Court upon the respondent would prejudice their present occupancy which is self
serving, whimsical and in fact immoral. It is axiomatic that the means would not
justify the end nor the end justify the means. Assuming damage to the present
occupants will occur and assuming further that they are entitled, the same should be
ventilated in a different action against the lessor or landlord, and the present petition
cannot be the proper forum, otherwise, while it maybe argued that there is a
multiplicity of suit which actually is groundless, on the other hand, there will be only
confusion of the issues to be resolved by the Court. Well valid enough is to reiterate
that the present petition is not the proper forum for the intervenors to shop for
whatever relief.

In view of the above, the Order allowing the intervenors in this case is likewise hereby
withdrawn for the purposes above discussed. Consequently, the Motion to present
additional parties is deemed denied, and the Motion to Strike Or Expunge From The
Records the Amended Answer In Intervention is deemed granted as in fact the same
become moot and academic with the elimination of the Intervenors in this case. [39]

Pursuant to the above Order of January 24, 1991, respondent City Engineer served a notice upon
petitioners revoking Building Permit No. 4936, ordering the stoppage of all construction work on
the building, and commanding discontinuance of the occupancy thereof.

On February 15, 1991, the aggrieved petitioners filed a Petition for Certiorari with Prayer
for Preliminary Injunction with the Court of Appeals, docketed as CA-G. R. SP No. 24189.

On February 27, 1991, the Court of Appeals issued a Temporary Restraining Order enjoining
the respondent Judge from implementing the questioned orders dated January 24, 1991 and April
19, 1989.[40]

After the respondents had sent in their answer, petitioners filed a Reply with a prayer for the
issuance of a writ of mandamus directing the respondent City Engineer to reissue the building
permit previously issued in favor of petitioner Sy Yong Hu & Sons, and to issue a certificate of
occupancy on the basis of the admission by respondent City Engineer that petitioner had
complied with the provisions of the National Building Code.[41]

On May 31, 1991, the Court of Appeals rendered its questioned decision denying the
petition.[42]

From the Resolution of the Court of Appeals granting the motion for reconsideration in CA-
G. R. SP No. 17070 and the Decision in CA-G. R. SP No. 24189, petitioners have come to this
Court for relief.

In G. R. No. 94285, petitioners contend by way of assignment of errors,[43] that:

RESPONDENT COURT OF APPEALS ERRED IN REVERSING ITS

MAIN DECISION IN CA-G. R. No. 17070, WHICH DECISION HAD
REMANDED TO THE SEC THE CASE FOR THE PROPER
 IMPLEMENTATION OF THE 1982 ABELLO AND 1988 SULIT
DECISIONS WHICH IN TURN ORDERED THE DISTRIBUTION AND
PARTITION OF THE PARTNERSHIP PROPERTIES.

II

RESPONDENT COURT OF APPEALS ERRED IN REINSTATING THE

TONGCO ORDER, WHICH HAD SUSPENDED THE DISSOLUTION OF
THE PARTNERSHIP AND THE DISTRIBUTION OF ITS ASSETS, AND
IN PLACING THE PARTNERSHIP PROPERTIES UNDER
RECEIVERSHIP PENDING THE RESOLUTION OF CIVIL CASE NO.
903 (13388), ON A GROUND NOT MADE THE BASIS OF THE SEC
RESOLUTION UNDER REVIEW, I. E., THE DISPOSITION BY A
PARTNER OF SMALL PROPERTIES ALREADY ADJUDICATED TO
HIM BY A FINAL SEC ORDER DATED DECEMBER 2, 1986 AND
MADE LONG BEFORE THE AGREEMENT OF JUNE 28, 1988 OF THE
PETITIONERS NOT TO DISPOSE OF THE PARTNERSHIP ASSETS.

In G. R. No. 100313, Petitioners assign as errors, that:[44]

THE HONORABLE COURT OF APPEALS (ELEVENTH DIVISION)

ERRED IN HOLDING THAT RESPONDENT JUDGE DID NOT ACT
WITHOUT JURISDICTION AND WITH GRAVE ABUSE OF
JURISDICTION IN ISSUING THE WRIT OF PRELIMINARY
MANDATORY INJUNCTION.

II

THE HONORABLE COURT OF APPEALS (ELEVENTH DIVISION)

ERRED IN HOLDING THAT THE RESPONDENT JUDGE DID NOT ACT
WITHOUT JURISDICTION AND WITH GRAVE ABUSE OF
DISCRETION IN DISALLOWING THE INTERVENTION OF
PETITIONERS IN CIVIL CASE NO. 5326.

III
 THE LOWER COURT ACTED WITH GRAVE ABUSE OF DISCRETION
IN ISSUING AND ORDERING THE IMPLEMENTATION OF THE WRIT
OF PRELIMINARY MANDATORY INJUNCTION DESPITE THE
ABSENCE OR LACK OF AN INJUNCTION BOND.[45]

On the two (2) issues raised in G. R. No. 94285, the Court rules for respondents.

Petitioners fault the Court of Appeals for affirming the 1989 Decision of the SEC which
approved the appointment of a receivership committee as ordered by Hearing Officer Felipe
Tongco. They theorize that the 1988 Tongco Decision varied the 1982 Abello Decision affirming
the dissolution of the partnership, contrary to the final and executory tenor of the said
judgment. To buttress their theory, petitioners offer the 1988 Sulit Decision which, among others,
expressly confirmed the finality of the Abello Decision.

On the same premise, petitioners aver that when Hearing Officer Tongco took over from
Hearing Officer Sison, he was left with no course of action as far as the proceedings in the SEC
Case were concerned other than to continue with the partition and distribution of the partnership
assets. Thus, the Order placing the partnership under a receivership committee was erroneous
and tainted with excess of jurisdiction.

The contentions are untenable. Petitioners fail to recognize the basic distinctions underlying
the principles of dissolution, winding up and partition or distribution. The dissolution of a
partnership is the change in the relation of the parties caused by any partner ceasing to be
associated in the carrying on, as might be distinguished from the winding up, of its
business. Upon its dissolution, the partnership continues and its legal personality is retained until
the complete winding up of its business culminating in its termination.[46]

The dissolution of the partnership did not mean that the juridical entity was immediately
terminated and that the distribution of the assets to its partners should perfunctorily follow. On
the contrary, the dissolution simply effected a change in the relationship among the partners. The
partnership, although dissolved, continues to exist until its termination, at which time the
winding up of its affairs should have been completed and the net partnership assets are
partitioned and distributed to the partners.[47]

The error, therefore, ascribed to the Court of Appeals is devoid of any sustainable basis. The
Abello Decision though, indeed, final and executory, did not pose any obstacle to the Hearing
Officer to issue orders not inconsistent therewith. From the time a dissolution is ordered until the
actual termination of the partnership, the SEC retained jurisdiction to adjudicate all incidents
relative thereto. Thus, the disputed order placing the partnership under a receivership committee
cannot be said to have varied the final order of dissolution. Neither did it suspend the dissolution
of the partnership. If at all, it only suspended the partition and distribution of the partnership
assets pending disposition of Civil Case No. 903 on the basis of the agreement by the parties and
under the circumstances of the case. It bears stressing that, like the appointment of a manager in
charge of the winding up of the affairs of the partnership, said appointment of a receiver during
the pendency of the dissolution is interlocutory in nature, well within the jurisdiction of the SEC.

Furthermore, having agreed with the respondents not to dispose of the partnership assets,
petitioners effectively consented to the suspension of the winding up or, more specifically, the
partition and distribution of subject assets. Petitioners are now estopped from questioning the
order of the Hearing Officer issued in accordance with the said agreement.[48]

Petitioners also assail the propriety of the receivership theorizing that there was no necessity
therefor, and that such remedy should be granted only in extreme cases, with respondent being
duty-bound to adduce evidence of the grave and irremediable loss or damage which it would
suffer if the same was not granted. It is further theorized that, at any rate, the rights of respondent
Intestate Estate are adequately protected since notices of lis pendens of the aforesaid civil case
have been annotated on the real properties of the partnership.[49]

To bolster petitioners' contention, they maintain that they are the majority partners of the
partnership Sy Yong Hu & Sons controlling Ninety Six per cent (96%) of its equity. As such,
they have the greatest interest in preserving the partnership properties for themselves, [50] and
therefore, keeping the said properties in their possession will not bring about any feared damage
or dissipation of such properties, petitioners stressed.

Sec. (6) of Presidential Decree No. 902-A, as amended, reads:

SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall

possess the following powers:

xxx xxx xxx

(c) To appoint one or more receivers of the property, real or personal, which is the
subject of the action pending before the commission in accordance with the pertinent
provisions of the Rules of Court, and in such other cases, whenever necessary in order
to preserve the rights of parties-litigants and/or protect the interest of the investing
public and creditors; xxx.

The findings of the Court of Appeals accord with existing rules and jurisprudence on
receivership. Conformably, it stated that:[51]
x x x From a reexamination of the issues and the evidences involved, We find merit in
respondents motion for reconsideration.

This Court notes with special attention the order dated June 28, 1988 issued by
Hearing Officer Felipe S. Tongco in SEC Case No. 1648 (Annex to Manifestation,
June 16, 1990) wherein all the parties agreed on the following:

1. That there is a pending case in court wherein the plaintiffs are claiming in their
complaint that all the assets of the partnership belong to Sy Yong Hu;

2. That the parties likewise agreed that during the pendency of the court case, there
will be no disposition of the partnership assets and further hearing is suspended. x x x

As observed by the SEC Commission (sic) in its Order dated January 16, 1989:

Ordinarily, appellants contention would be correct, except that the en banc order of
April 29th appears to have been overtaken, and accordingly, rendered inappropriate,
by subsequent developments in SEC Case No. 1648, particularly the entry in that
proceedings, as of April 29, 1988, of an intervenor who claims a superior and
exclusive ownership right to all the partnership assets and property. This claim of
superior ownership right is presently pending adjudication before the Regional Trial
Court of Negros Occidental, And precisely because if this supervening development,
it would appear that the parties in SEC Case No. 1648 agreed among themselves, as of
June 28, 1988, that during the pendency of the Negros Occidental case just mentioned,
there should be no disposition of partnership assets or property, and further, that the
proceedings in SEC Case No. 1648 should be suspended in the meantime (p. 2, Order;
p. 12, Rollo)

As alleged by the respondents and as shown by the records there is now pending civil
case entitled Keng Sian and Intestate of Sy Yong Hu vs. Jayme Sy, Jesus Sy, Marciano
Sy, Willy Sy, Intestate of Jose Sy, Intestate of Vicente Sy, Sy Yong Hu & co and Sy
Yong Hu & Sons denominated as Civil Case No. 903 before Branch 50 of the
Regional Trial Court of Bacolod City.

Moreover, a review of the records reveal that certain properties in question have
already been sold as of 1987, as evidenced by deeds of absolute sale executed by
Jesus in favor of Reynaldo Navarro (p. 331, Rollo), among others.
To ensure that no further disposition shall be made of the questioned assets and in
view of the pending civil case in the lower court, there is a compelling necessity to
place all these properties and assets under the management of a receivership
committee. The receivership committee, which will provide active participation,
through a designated representative, on the part of all interested parties, can best
protect the properties involved and assure fairness and equity for all.

Receivership, which is admittedly a harsh remedy, should be granted with extreme caution.
Sound bases therefor must appear on record, and there should be a clear showing of its
[52]

necessity.[53] The need for a receivership in the case under consideration can be gleaned from the
aforecited disquisition by the Court of Appeals finding that the properties of the partnership were
in danger of being damaged or lost on account of certain acts of the appointed manager in
liquidation.

The dispositions of certain properties by the said manager, on the basis of an order of partial
partition, dated December 2, 1986, by Hearing Officer Sison, which was not yet final and
executory, indicated that the feared irreparable injury to the properties of the partnership might
happen again. So also, the failure of the manager in liquidation to submit to the SEC an
accounting of all the partnership assets as required in its order of April 29, 1988, justified the
SEC in placing the subject assets under receivership.

Moreover, it has been held by this Court that an order placing the partnership under
receivership so as to wind up its affairs in an orderly manner and to protect the interest of the
plaintiff (herein private respondent) was not tainted with grave abuse of discretion.[54] The
allegation that respondents rights are adequately protected by the notices of lis pendens in Civil
Case 903 is inaccurate. As pointed out in their Comment to the Petition, the private respondents
claim that the partnership assets include the income and fruits thereof. Therefore, protection of
such rights and preservation of the properties involved are best left to a receivership committee
in which the opposing parties are represented.

What is more, as held in Go Tecson vs. Macaraig: [55]

The power to appoint a receiver pendente lite is discretionary with the judge of the
court of first instance; and once the discretion is exercised, the appellate court will not
interfere, except in a clear case of abuse thereof, or an extra limitation of jurisdiction.

Here, no clear abuse of discretion in the appointment of a receiver in the case under
consideration can be discerned.

With respect to G. R. No. 100313.[56]

 Petitioners argue in this case that the failure of the private respondents to implead them in
Civil Case No. 5326 constituted a violation of due process. It is their submission that the ex
parte grant of said petition by the trial court worked to their prejudice as they were deprived of
an opportunity to be heard on the allegations of the petition concerning subject property and
assets. The recall of the order granting their Motion to Intervene was done without the
observance of due process and consequently without jurisdiction on the part of the lower court.

Commenting on the Petition, private respondents maintain that the only issue in the present
case is whether or not there was a violation of the Building Code. They contend that after due
and proper hearing before the lower court, it was fully established that the provisions of the said
Code had been violated, warranting issuance of the Writ of Preliminary Injunction dated April
19, 1989. They further asseverate that the petitioners, who are the owner and lessees in the
building under controversy, have nothing to do with the case for mandamus since it is directed
against the respondent building official to perform a specific duty mandated by the provisions of
the Building Code.

In his Comment, the respondent City Engineer, relying on the validity of the order of the
trial court to padlock the building, denied any impropriety in his compliance with the said order.

After a careful examination of the records on hand, the Court finds merit in the petition.

In opposing the petition, respondent intestate estate anchors its stance on the existence of
violations of pertinent provisions of the aforesaid Code. As regards due process, however, a
distinction must be made between matters of substance. [57] In essence, procedural due process
refers to the method or manner by which the law is enforced, while substantive due process
requires that the law itself, not merely the procedure by which the law would be enforced, is fair,
reasonable, and just.[58] Although private respondent upholds the substantive aspect of due
process, it, in the same breath, brushes aside its procedural aspect, which is just as important, if
the constitutional injunction against deprivation of property without due process is to be
observed.

Settled is the rule that the essence of due process is the opportunity to be heard. Thus,
in Legarda vs. Court of Appeals et al., [59] the Court held that as long as a party was given the
opportunity to defend her interest in due course, he cannot be said to have been denied due
process of law.

Contrary to these basic tenets, the trial court gave due course to the petition for mandamus,
and granted the prayer for the issuance of a writ of preliminary injunction on May 4, 1989,
notwithstanding the fact that the owner (herein petitioner Sy Yong Hu) of the building and its
occupants[60] were not impleaded as parties in the case. Affirming the same, the Court of Appeals
acknowledged that the lower court came out with the said order upon the testimony of the lone
witness for the respondent, in the person of the City Engineer, whose testimony was not
effectively traversed by the petitioners. This conclusion arrived at by the Court of Appeals is
erroneous in the face of the irrefutable fact that the herein petitioners were not made parties in
the said case and, consequently, had absolutely no opportunity to cross examine the witness of
private respondent and to present contradicting evidence.

To be sure, the petitioners are indispensable parties in Civil Case No. 5326, which sought to
close subject building. Such being the case, no final determination of the claims thereover could
be had.[61] That the petition for mandamus with a prayer for the issuance of a writ of preliminary
mandatory injunction was only directed against the City Engineer is of no moment. No matter
how private respondent justifies its failure to implead the petitioners, the alleged violation of the
provisions of the Building Code relative to the reconstruction of the building in question, by
petitioners, did not warrant an ex parteand summary resolution of the petition. The violation of a
substantive law should not be confused with punishment of the violator for such violation. The
former merely gives rise to a cause of action while the latter is its effect, after compliance with
the requirements of due process.

The trial court failed to give petitioners their day in court to be heard before they were
condemned for the alleged violation of certain provisions of the Building Code. Being the owner
of the building in question and lessees thereon, petitioners possess property rights entitled to be
protected by law. Their property rights cannot be arbitrarily interfered with without running afoul
with the due process rule enshrined in the Bill of Rights.

For failure to observe due process, the herein respondent court acted without jurisdiction. As
a result, petitioners cannot be bound by its orders.Generally accepted is the principle that no man
shall be affected by any proceeding to which he is a stranger, and strangers to a case are not
bound by judgment rendered by the court.[62]

In similar fashion, the respondent court acted with grave abuse of discretion when it
disallowed the intervention of petitioners in Civil Case No. 5326.As it was, the issuance of the
Writ of Preliminary Injunction directing the padlocking of the building was improper for non-
conformity with the rudiments of due process.

Parenthetically, the trial court, in issuing the questioned order, ignored established principles
relative to the issuance of a Writ of Preliminary Injunction. For the issuance of the writ of
preliminary injunction to be proper, it must be shown that the invasion of the right sought to be
protected is material and substantial, that the right of complainant is clear and unmistakable and
that there is an urgent and paramount necessity for the writ to prevent serious damage.[63]

In light of the allegations supporting the prayer for the issuance of a writ of preliminary
injunction, the Court is at a loss as to the basis of the respondent judge in issuing the same. What
is clear is that complainant (now private respondent) therein, which happens to be a juridical
person (Estate of Sy Yong Hu), made general allegations of hazard and serious damage to the
public due to violations of various provisions of the Building Code, but without any showing of
any grave damage or injury it was bound to suffer should the writ not issue.

Finally, the Court notes, with disapproval, what the respondent court did in ordering the
ejectment of the lawful owner and the occupants of the building, and disposed of the case before
him even before it was heard on the merits by the simple expedient of issuing the said writ of
preliminary injunction. In Ortigas & Company Limited Partnership vs. Court of Appeals et
al. this Court held that courts should avoid issuing a writ of preliminary injunction which in
effect disposes of the main case without trial.[64]

Resolution of the third issue has become moot and academic in view of the Courts finding of
grave abuse of discretion tainting the issuance of the Writ of Preliminary Injunction in question.

WHEREFORE, the Resolution of the Court of Appeals in CA-G. R. No. 17070 is

AFFIRMED and its Decision in CA-G. R. No. 24189 REVERSED.No pronouncement as to
costs.

SO ORDERED.

[G.R. No. L-8715. June 30, 1956.]

PHILIPPINE AIR LINES, INC., Petitioner, vs. ANTONIO BALANGUIT, ET AL.,
(PUBLIC UTILITIES EMPLOYEES ASSOCIATION [FEATI CHAPTER] and THE
COURT OF INDUSTRIAL RELATIONS,Respondents.

DECISION
MONTEMAYOR, J.:
This is a petition for certiorari filed by Philippine Air Lines, Inc. (later referred to as
the PAL) against Antonio Balanguit, et al., (Public Utilities Employees Association
[FEATI Chapter] later referred to as the EMPLOYEES and the Court of Industrial
Relations (CIR) to review the order of the latter dated December 10, 1954, directing
the PAL to pay the money value of whatever vacation and sick leave might have
accrued to the employees listed in the petition of Balanguit, et al., from August 1,
1946 up to June 15, 1947. For the facts of the case, we adopt and reproduce the
STATEMENT OF FACTS made by Petitioner in its petition which the employees in
their answer admit to be substantially correct.
1. Sometime before May 21, 1947, the Philippine Air Lines, Inc. (hereinafter
referred to as PAL for brevity) purchased and acquired a majority of the shares of
the Far Eastern Air Transport, Inc. (hereinafter referred to as FEATI, also for brevity).
Those two airlines were, previous to the said purchases, then competing in various
air routes through the Philippines, with the result that both companies were losing
and it became necessary to maintain only one airline. The purchase gave rise to the
problem of what to do with the FEATI employees. After some negotiations between
the representatives of the FEATI Employees Association and the PAL, the parties
finally reached an agreement on May 21, 1947, whereby the PAL agreed to absorb
some 70 per cent of the FEATI employees, and the said employees agreed to work
for PAL under the same terms and conditions as they worked for the FEATI until such
time as they come to a definite understanding. The pertinent portion of the
aforesaid Agreement reads as follows: chanroblesvirt uallawlibrary

1. That the PAL will absorb all the employees and laborers that could possibly be
absorbed by them belonging to the Public Utilities Employees Association FEATI
Chapter, and that these employees and laborers are to work with the PAL in
accordance with the provisions of the Collective Bargaining Agreement entered into
between the previous Management of FEATI and the representatives of the Public
Utilities Employees Association FEATI Chapter, dated August 1, 1946, until such time
as the said Association and the PAL Employees organization come to a definite
understanding. A certified copy of the said Agreement is hereto attached and made
a part hereof an Annex A of this petition.
2. The Collective Bargaining Agreement with the FEATI referred to in the above
employment agreement of May 21, 1947 of the Public Utilities Employees
Association with the PAL was their Industrial Agreement of August 1, 1946, the
pertinent portion of which granted the said employees certain privileges, among
which were: chanroblesvirt uallawlibrary

IV. Vacation and Sick Leave. The employees will be entitled to twelve (12)
days vacation leave and twelve (12) days sick leave with pay every year, which may
be cumulative.
A certified copy of the said Industrial Agreement is hereto attached and made a part
hereof as Annex B.
3. On July 9, 1947, the PAL reached a definite understanding with the Public
Utilities Employees Association aforesaid whereby they entered into an agreement
cancelling the agreements of May 21, 1947 and August 1, 1946, and declaring them
void and of no further force and effect. It also provided for the laying off of all the
FEATI employees as of June 15, 1947 and the payment to them of one and a half
months separation pay which amounted, roughly to P150,000.00.
A certified copy of said Agreement is hereto attached and made a part hereof as
Annex C.
4. On November 11, 1952, almost six years from the time they were laid off, the
Public Utilities Employees Association aforesaid filed a petition with the Court of
Industrial Relations praying that the PAL be ordered to pay them the twelve (12)
days vacation leave and twelve (12) days sick leave with pay, from August 1, 1946,
which had already accrued at the time they were laid off on June 15, 1947.
5. The PAL, in its Answer to the Employees petition, denied liability, alleging that
it was not a party to the Agreement of August 1, 1946. The said employees were
absorbed by the PAL only on May 21, 1947 and were laid off on June 15, 1947.
6. On December 10, 1954, the Court of Industrial Relations, through Associate
Judge V. Jimenez Yanson, issued an Order requiring the PAL to pay the said
employees the money value of whatever vacation and sick leave might have
accrued to the said employees from August 1, 1946 to June 15, 1947.
According to the PAL the amount involved, namely, the money equivalent of the
vacation and sick leave which it is directed to pay by the CIR is roughly about
P100,000.00. The question to determine is whether or not the PAL is legally liable
for the payment of this amount. It is unfortunate that the final agreement of July 9,
1946, between the PAL and FEATI on one side and the Employees on the other,
failed to make any mention whatsoever about the money equivalent of this vacation
and sick leave, whether it was payable or not and if payable, by whom. There is no
question that this leave was earned by the employees from the FEATI for the
services rendered to it by them from August 1, 1946 (the date of the industrial
agreement between them and the FEATI, when they were accorded this right to
twelve (12) days vacation leave and twelve (12) days sick leave for every year of
service) up to May 21, 1947, when they ceased to render said service to the FEATI.
For those employees who were absorbed and continued to render service to the PAL
from May 21, 1947 to June 15, 1947 (a period of less than one month), when they
were all laid-off, they may be said to have earned the corresponding leave from the
PAL. Did the PAL assume this obligation of the FEATI to pay the equivalent of this
leave which the employees earned from the FEATI ? Nothing is said in the
agreement of July 9, 1947. The employees claim and also the CIR, though indirectly,
that when the PAL bought out the FEATI the former assumed all the rights and
obligations of the latter. This is too sweeping a statement. In some cases, when one
company buys out another and continues the business of the latter company, the
buyer may be said to assume the obligations of the company bought out when said
obligations are not of considerable amount or value, specially when incurred in the
ordinary course of trade, and when the business of the latter company is continued.
However, when said obligation is of extraordinary value, as in this case, amounting
to about P100,000, and the FEATI was bought out not to continue its business but to
stop its operation in order to eliminate competition, as shown by the fact that all the
employees of the FEATI were laid-off, we cannot say that the vendee assumed all
the obligations of the rival airline.
What the employees should have done at the time of the, negotiation among the
PAL, the FEATI and themselves preparatory to the execution of the agreement of July
9, 1947, was to raise the question as to who would pay them the equivalent of the
vacation and sick leave already earned by them under the FEATI. Had they insisted
on its payment, the FEATI could perhaps have been made to pay unless, of course,
the PAL agreed to assume the obligation. When they (employees) failed to raise that
question or have it embodied in the agreement, said failure may be regarded as a
waiver of their right. And when they received a separation pay equivalent to one
and one half months and then kept quiet about their vacation and sick leave for a
period of more than five years, there is every reason to believe that there was
actually such renunciation and waiver. It would be no surprise if this separation pay
was understood and agreed upon by all parties to include the equivalent of leave
already earned by the employees. It may be recalled that the separation pay was
not only for one month but it was for one month and a half, exceeding the
mesada provided for in the Code of Commerce (still in force in 1947) by half a
month. It is highly possible that the extra half month pay was to take care of the
vacation and sick leave, especially when we consider the fact that at the time of
separation on June 15, 1947, the employees had, for purposes of earning the leave,
not yet completed one year service (from August 1, 1946 to June 15, 1947).
Anyway, even assuming for a moment that the employees were entitled to the
payment of said leave, they were guilty of laches. It would be unfair now to demand
this payment from the PAL after more than five years when the papers and the
records of the service of said employees from August 1, 1946 to May or June, 1947,
may no longer exist; when the FEATI has long ceased operations and has long
chan roblesvirt ualawlibrary

ceased to exist and when its officials who were in a position to determine which
employees because of their faithful, efficient and continuous service were entitled
to leave and for how many days, may no longer be available.
The purpose of vacation is to afford to a laborer a chance to get a much-needed
rest to replenish his worn out energies and acquire a new vitality to enable him to
efficiently perform his duties, and not merely to give him additional salary or
bounty. This privilege must be demanded in its opportune time and if he allows the
years to go by in silence, he waives it. It becomes a mere concession or act of grace
of the employer. ( Sun-Ripe Coconut Products, Inc. vs. National Labor Union, 97
Phil., 691; 51 O.G. 5133.)
chan roblesv irtualawlibrary

In view of the foregoing, the petition for certiorari is granted, and the order of the
CIR of December 10, 1954, and the resolution of the CIR in banc of December 29,
1954, are set aside, and the complaint of the employees (Association) against the
PAL in Case No. 89-V(2) is hereby dismissed, with costs.